If you are a long term investor, you tend to always make returns in equities. In fact, equity shares have known to outperform other asset classes in the long term. We have selected a few stocks that offer great opportunities for long term investors. These include stocks that have a very low debt to equity ratio and which have shown good growth over the years. These stocks have the tremendous potential to generate money in the long term.
Some of them are from very fast growing sector like construction, agrochemicals and ofcourse, the fast improving PSU banking space.
Lupin is the second largest pharma company in India and the sixth largest generics pharma company globally. In the last few quarters we have seen investors heavily dumping pharma stocks on account of US FDA worries and also on account of squeeze of margins in the US. In line with this, Lupin Ltd has also seen its stock nosedive from levels of Rs 1,800 to the current price of Rs 1032. Going ahead complex and branded generics is likely to help growth in the US markets and this is what Lupin is likely to focus on. Between 2017 and 2020, Lupin wants to be a leading generics player with a larger complex generics mix. It also plans to increase its geographic spread. In 2017, the company achieved quite a few milestones, with its Goa EIR receiving US FDA, the company also saw its somerset, NJ, New block commissioned, saw Albuterol MDI ANDA filing and a new plant in Sikkim and Japan being innaugurated.
The way forward for Lupin
Going ahead the company may face some margin pressures in the coming few quarters. However, the road ahead looks a little optimistic as well. The company in 2017 had 154 ANDA pending filings
with record 37 filings and 34 approvals in FY17. This should augur well as and when approvals happen. The 28 pending FTFs target a market size of $12.4 billion. The company is also making an enhanced investment in inhalation, biosimilars and injectables. Recently, one of the company's plants were inspected by the US FDA and one 483 observation was issued, which was cleared during the inspection itself. We believe that though there are temporary issues with margins and US FDA approvals, Lupin should report an EPS of Rs 60 by 2018-19. This should take the stock to Rs 1200 from levels of Rs 1023. Lupin is a good stock to buy for the long term. Check stock quote of Lupin here
TV Today Network
TV Today Network operates the popular Headline Today and Aaj Tak channels. The company saw a phenomenal quarterly performance in the last one year. In fact, the stock recently hit a new 52-week low of Rs 236 on the NSE. Probably this is a stock that is one of the cheapest in terms of price to earnings multiples and should not be languishing at near 52-week lows. The company reported an EPS of Rs 18 for 2016-17. Advert spends in the next few years are likely to rise and the company's Aaj Tak channel continues to maintain its huge viewership base. We believe that TV Today Network could report an EPS of Rs 25 at least by 2018-19. This means if you apply a very conservative valuation of 15 times the stock should not be quoting at less than Rs 375. The current market price is just about Rs 236. This is one of the best midcap stocks currently available from the media space.
Aurobindo Pharma was the only large pharma stock that jumped after the company declared its quarterly numbers to March 31, 2017. Glenmark, Sun Pharma and Lupin all had very steep falls after they declared their quarterly numbers. Aurobindo net profits did not fall as steep as some of its peers. In fact, pricing pressures in the US are beginning to play out, which is pushing Indian pharma stocks lower. Aurobindo Pharma has a big advantage here since they do not rely on a few products to boost revenues and profitability. The company has one of the finest mix of products that makes the company's shares a very attractive long term bet.
Relatively cheap on valuations
Now, there are a few very important reasons why this stock is a great bet. The company has a staggering 115 ANDAs under review. If it gets approval for some of these, it could boost the revenue prospects of the company tremendously in the US.
The company's acquisition of Generis Farmaceutica SA in Jan 2017, opens a plethora of opportunities not only in Portugal, but also in Europe. The company does not rely heavily on a few products, which is why it is the best play in the business. What is most interesting is the fact that the company's net debt has fallen from $640 million as on March 31, 2016 to $439 million in March 31, 2017. This is likely to reduce interest costs and provide a superb opportunity to improve profitability numbers. Now coming to fundamentals, the company reported an EPS of Rs 39.33 for FY 2016-17. We believe that the company can do at least an EPS of Rs 50 by 2018-19, which should take the stock to Rs 750, based on a p/e of a very low 15 times. A good stock to buy on declines for the long term.
Rallis India has to be a great pick from the pesticides and agrochemicals space. To begin with the government plans to double the farmer income in the next 5 years.
The huge outlay towards the agriculture sector, is a big positive for a player like Rallis India.
The one good thing about the stock is that the fundamentals are very much in place. The debt to equity ratio is less than 0.10 and the company reported good numbers for FY 2017. In fact, the company's EPS for the year was close to Rs 14, which translates into a p/e of just 17 times one year forward earnings at the current market price of Rs 245. Check stock quote of Rallis here
Rallis India is a Tata Group company and the stock last closed at Rs 221.
Best small cap stocks to buy
In the past some small cap and mid cap stocks have given excellent returns. In fact, small cap stocks have beaten returns from large cap stocks, which have made them excellent bets for the long and short term. Please click on the link to see some excellent small cap stocks ideas.
Taxation of shares
It is important to note that shares do not attract a long term capital gains tax. However, if you sell shares before one year, they attract a sort term capital gains tax of 15 per cent. So, before investing it is very important to consider the tax liability on the same. On the other hand it is also important to note that the tax liability is almost similar to those of equity mutual funds. One important thing to note is that there is no long term capitals gains if you hold shares and sell them at a profit of more than one year.
The article is not a solicitation to buy, sell in securities mentioned in the article. Greynium Information Technologies Pvt Ltd, its subsidiaries, associates and the author do not accept culpability for losses and/or damages arising based on information in this article.